Compliance Audit (Also Known as Tax Audit)
A tax compliance audit is a special audit carried out by a CPA firm in Taiwan to verify whether a company has calculated and filed its corporate income tax correctly in accordance with all applicable regulations. At the conclusion of the audit, a special tax compliance audit report is issued to the tax office.
The audit procedures undertaken for a tax compliance audit differ from financial statement audits in that most of the work focuses on reviewing expense vouchers and verifying the Company's compliance with income tax laws and regulations.
A tax compliance audit is not compulsory for most companies. Nevertheless, the government grants a number of significant incentives to companies who hire CPA firms to carry out such audits:
- Companies for which a tax compliance audit report is filed along with the corporate income tax return are entitled to use a more favorable formula to calculate the maximum tax-deductible amount for entertainment expenses.
- When a CPA tax compliance audit report has been filed together with a tax return, tax officers are required to address their initial questions to the CPA firm before approaching the company for additional information.
- On average, less than 30% of tax returns lodged with CPA tax compliance audit reports are selected for detailed examination by the tax authority.
The Grant Thornton Approach
The Grant Thornton tax team conducts interim audit and tax reviews prior to the end of the year. We discuss our findings with the client's management and, if any violation of tax regulations is detected, we advise the client to file for rectification prior to the end of the year. Upon completion of our tax compliance audit report, the Grant Thornton tax team will discuss our findings and recommendations with the client's management.